Question

Which of the following statements is CORRECT?

a. Timelines are not useful for visualizing complex problems prior to doing actual calculations.
b. Timelines can be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly.
c. A timeline is not meaningful unless all cash flows occur annually.
d. Timelines can only be constructed for annuities where the payments occur at the end of the periods, i.e., for ordinary annuities.
e. Timelines cannot be constructed where some of the payments constitute an annuity but others are unequal and thus are not part of the annuity.

Answer 1

The correct answer is that timelines can be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly. They are versatile tools that help in the analysis of financial problems by visualizing the timing and structure of cash flows.

Step-by-step explanation:

The correct statement is: Timelines can be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly. This means that timelines are quite versatile and can be used for a range of different cash flow scenarios. They are not limited to only annual cash flows or regular payments. Timelines are indeed useful tools for visualizing the timing of cash flows in financial calculations, which helps in understanding complex problems and structuring financial analysis accordingly.

Think carefully about the timeline of events: What happens first, what happens next? What is cause, what is effect? Keeping the order right enhances the accuracy of financial analysis. It is always beneficial to start by drawing a timeline to organize the given information and properly analyze the problem.